Building up trust

In 2008, a Gallup poll reported that, on average, less than half of the OECD population trusted their government. The crisis worsened the situation with a decline of four additional percentage points since then. Public actors and institutions have been blamed for their failure to cope with the crisis and for the impact it has had on people’s lives. The crisis highlighted serious regulatory failures, uneven enforcement of rules and many other governance problems that called into question the government’s capacity to manage the economy.

The impact of low levels of trust is becoming clearer. Trust in institutions increases economic activity by encouraging the investment and consumption decisions that foster growth. Trust in institutions (as well as interpersonal trust) reduces the perception of risk related to a range of decisions, from whether a firm should hire new staff or an employee should invest in training. Trust extends the planning horizon of economic agents, increasing their dynamism. Economic prosperity is linked to the ability of institutions–economic, justice, social, etc.–to guarantee a predictable and stable environment.

Trust helps governments too. Many structural reforms involve short-term sacrifices in anticipation of longer-term gains, and require broad social and political consensus to be effective and sustainable. In a high-trust environment, such reforms can be properly implemented and sustained long enough to bear fruit. In a low-trust climate, citizens will prioritise immediate benefits, and will induce politicians to seek short-term, visible gains. At a time when so many countries are embarking on deep but necessary structural reforms, trust can make a huge difference.

Rules and regulations are never enough to eliminate or deter abuse. Their effectiveness depends on the extent to which people see them as fair and legitimate enough to outweigh the benefits of non-compliance. For example, mistrust in government undermines tax compliance, which in turn reduces revenues available for social expenditures. Citizens are more likely to perceive tax obligations more favourably, and comply with those obligations voluntarily, when their government is seen to be acting in a trustworthy manner. For all these reasons, trust is not simply a confirmation of good economic management; rather it is an important ingredient in economic success–a prerequisite, as much as an outcome.

How then can governments start to win back the trust of their citizens? First we need to improve the measurement of trust and generate data to help policymakers understand the expectations of citizens. Second, we must address “big trust”, the ability of government to reassure citizens that it is taking care of the things that are beyond the control of individuals, though in a fully accountable, transparent, fashion. Government has to demonstrate that it can “govern for the future” and “govern for the unexpected”. Third, we need to build fairness in policymaking. This has at least two dimensions: first, prevent undue influence in policymaking by addressing the challenges posed by political financing and lobbying, and second, make policymaking and implementation processes more inclusive through information, and consultation with the public.

Governments that can demonstrate that they are reliable, fair and responsive can reap a trust dividend with tangible economic and social benefits.